International Encyclopedia of Public Policy and Administration - Vol. 2

DONATIONS. Contributions of Money or Other
Property Having Value. Donations usually come in the
form of cash contributions to charitable organizations
through one or more of the organization's fund-raising activities. However, donations need not be monetary. For example, contributions may take the form of anything from
old clothes to the family farm.

For tax purposes, it is important to determine that a
gift has occurred (control having passed from the donor to
the donee) and that whatever was given has deductible
value -- that is, it represents a decrease in the value to the
donor, and an increase in the resources available to the
donee organization to carry out its charitable purposes.

Complicating such determinations are quid pro quo
arrangements in which the donor received something of
value from the nonprofit in exchange for the contribution --
a ticket to a play, or commemorative coffee mug, for example. So long as the value of that which was received by
the donor is less that the value of that which was transferred to the nonprofit, a donation will have occurred.
However, the deductible amount is the difference between
the value received by the donor and the full value of the
donation.

For many years, the Internal Revenue Service has recognized that the area of "in-kind" donations (nonmonetary gifts of tangible personal property) has been most
abused by taxpayers. This concern has extended to Congress, and it has become incumbent upon nonprofits to
follow regulations strictly in reporting these gifts and the
values exchanged.

Many nonprofits are taking great pains to educate
their donors about deductibility issues as a service to the
donor and to avoid disputes with either the donor or the
Internal Revenue Service. For example, many donors are
unaware that the time they spend performing the professional services for a nonprofit that they employ to earn a
living are not deductible. On the other hand, the out-ofpocket expenses they incur while performing services for
nonprofits are deductible.

In the colloquial, donation often refers to small or
below-average contributions and those gifts acquired by
nonprofits through special events and broad fund-raising
efforts such as donor acquisition mailings, charity golf
tournaments, and collection cans. (See also gifts; causerelated marketing).

ROBERT BUCHANAN AND WILLIAM BERGOSH

DONOR. One who gives or donates cash, materials,
or other items having monetary value to a nonprofit.

A donor may be an individual; foundation; corporation; local, state, or national governmental agency; association; church; club; or other group of people with common interest in supporting a nonprofit. A donation may
include money, tangible personal property items, securities, real estate, or other items of value.

According to Webster's Dictionary, the word gift
means "something that is voluntarily transferred by one
person to another without compensation." This would
seem simple and straightforward when applied to gifts to
nonprofits. However, through the years, the courts have
applied several tests to determine whether or not a true gift
to charity has been made. This has complicated the definition of whether or not there has been a donation.

In the eleventh edition of Tax Economics of Charitable
Giving, a publication of Arthur Andersen & Co., S.C.
( 1991), the subjective tests examined donative intent, "detached and disinterested generosity," or "affection, respect,
admiration, charity or like impulses" in the heart and mind
of the donor. The courts have more recently rejected such
tests with one court explaining that "if the policy of the
income tax laws favoring charitable contributions is to
be effectively carried out, there is good reason to avoid
unnecessary intrusions of subjective judgments as to what
prompts the financial support of the organized but nongovernmental good works of society."

The more valid measurement of whether or not a deductible gift was made lies in determining that the donor
transferred money or property without adequate consideration in return. In a sense, the courts have returned to the
dictionary in identifying deductible gifts.

In the real world in which nonprofits must pursue gifts
or expire, they must cope with the myriad motivations of
donors of all stripes. Donors who have given anything,
even nondeductible contributions such as those of their
time, still consider themselves to be donors of equal importance to the most generous of the wealthy relative to
their abilities to give. Recognizing this, most nonprofts define donors liberally.

Increasingly, research is under way to define the term
donor and why they support not for profit organizations.
For example, The Seven Faces of Philanthropy attempts to
provide a "detailed understanding of the concerns, interests, needs, and motivations of affluent individual donors
as . . . by categorizing wealthy donors into seven motivational types" (Prince and
File 1994).

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